Card skimmers are small devices that fit into credit card readers (say, at a gas station or outside ATM) and snag your card information. This can then be used to steal your credentials and commit identity theft.
Unfortunately, credit card fraud is all too common, totaling more than 426,000 instances in the most recent year studied. These skimmers, installed by would-be criminals, contribute to this figure. Here’s another indicator of how pervasive skimmers are: The FBI reports that financial institutions and consumers lose more than $1 billion per year to this practice.
To help protect yourself against theft, keep reading to learn what credit card skimmers are, how to spot a credit card skimmer, and what to do if your credit card is skimmed.
What Is a Credit Card Skimmer?
Credit card skimming is a form of theft that occurs when someone installs a small electronic device, known as a credit card skimmer, into a card reader. This device can read and collect information from a credit card when someone makes a purchase. The skimmer does this by reading the magnetic strip on a debit or credit card, which provides the full name on the credit card as well as the credit card number and credit card expiration date.
Credit card skimmers have been around for almost a decade. They are most commonly attached to gas station pumps, ATMs, and other types of machines that accept payments from both secured and unsecured credit cards as well as debit cards.
Identifying Credit Card Skimmers
Knowing how to check for credit card skimmers is a great way to protect against potential theft. Especially when using an outdoor payment machine like a gas pump or ATM, take a look at the card reader for signs of a credit card skimmer. See if the card reader is sticking out at an angle or looks any different from other nearby card readers. Also check if the card reader is loose or the keypad is unusually bulky.
When skimmers first came into play, it was easier to spot a credit card skimmer as the card reader often appeared to be tampered with or wiggled when used. Today, skimmers can fit snugly over the scanner, which makes it much harder to tell if something is amiss.
In the instance that all seems well with the card scanner at a gas station, double check the pump. If a gas pump is open, unlocked, has had the tamper-evident security tape altered or removed, or anything else seems amiss, it’s a good idea to use a different pump.
If possible, it’s best to use a credit card pump that has an encrypted credit card reader. Ideally, use one that has the illuminated green lock symbol near the credit card reader — this symbolizes that it’s been encrypted.
What Happens When a Credit Card Is Skimmed
When a credit card skimmer reads a magnetic strip on the back of a credit or debit card, it can obtain the cardholder’s full name, credit card number, and the credit card expiration date. Sometimes, scammers add a small camera into the equation in order to watch someone enter their PIN number when using a debit card. Really, one of the few things that’s safe is the CVV number on a credit card, which is why it’s so important to keep this secure.
Once the thief has this information in hand, they can use the card anywhere that accepts credit card payments. They may have access to the cardholder’s bank account and could steal their identity. Or the thief can sell the information on the dark web.
If you’re old enough to get a credit card, it’s critical to know how to use it responsibly and safely. Here’s a few tips to keep in mind to avoid falling prey to credit card skimmers.
Use NFC or Supervised ATMs
To help avoid coming into contact with a card skimmer, try to use payment terminals that are supervised by security cameras or skip using the card reader altogether and make a Near Field Communication(NFC) payment. NFC payments are secure transactions made with a smartphone, allowing you to avoid swiping your card at all.
Check and Recheck the Keypad
When it comes to how to spot a credit card skimmer, remember to check the keypad for any signs of tampering. These days, it’s a bit harder to identify when a keypad has a skimmer on it, but if anything seems amiss, use another payment machine or go inside the gas station or bank to make a transaction or withdrawal.
Don’t Leave Your Card Unattended
Whenever possible, make a transaction or withdrawal inside of a gas station or bank. The odds of a criminal accessing inside payment terminals with a clerk watching are much lower compared to outside payment terminals. It only takes criminals a few seconds to add a skimmer to an outside payment terminal where no one is watching.
Just like taking the time to compare the APRs on credit cards, spending a few extra minutes going inside to buy gas or take out cash can pay off. It could help you avoid countless hours of dealing with identity theft as a result of credit card skimming.
Use Credit Cards With a Chip
If you’re familiar with what a credit card is, you’ll know that most credit cards today come with a “chip” that allows consumers to make payments without actually swiping their credit card. With an EMV chip, it’s possible to simply tap a credit card instead of swiping it to make a payment, which helps avoid credit card skimming. If you have a card that is old-school and lacks a chip, you might ask the issuer if an updated version is available.
Be Vigilant
If someone does need to use an outdoor ATM or gas pump, use one that is close to the building and preferably in the line of sight of an attendant, security guard, or security cameras. The more hidden a payment terminal is, the more likely it is that there is a credit skimmer placed on it. Also make sure to be aware of your surroundings when using any exterior payment terminals.
Sign Up for Credit and Debt Alerts
One way to catch fraud is to sign up for alerts that send a notification any time a purchase is made with the card. After all, it’s unlikely a fraudster’s activity will result in a negative balance on a credit card.
By receiving an alert right when a purchase is made, you can confirm whether or not you made it. If you believe an unauthorized purchase was made, contact your bank or credit card issuer immediately.
Check Your Account Regularly
To be extra vigilant, double-check debit and credit card statements frequently to make sure that no unauthorized charges slipped through the cracks. It can be easier to stay on top of charges if you check in throughout the month rather than waiting until you receive your credit card statement and being shocked that you’re almost at your credit card limit due to unauthorized spending.
Can You Get a Refund if Your Card Gets Skimmed?
If you realize your credit card or debit card has been skimmed, check in with your bank or credit card issuer about next steps. You should also put a freeze on your credit report to ensure that the fraudsters aren’t applying for new credit cards in your name. In some cases, you may need to file a police report.
The credit card issuer or bank will have fraud protections in place and should refund you for any money lost. These protections are an important part of how credit cards work. Still, the sooner you cancel the cards and stop the fraud, the better. Most top credit cards have zero-liability policies that will refund the full amount of the fraudulent charges. If they don’t, the maximum liability anyone has as a consumer is $50.
The Takeaway
Skimmers, small devices that fit over credit card readers, are unfortunately a common way that financial credentials can be stolen and unauthorized charges or identity theft enacted. These are especially common at gas station pumps and outside ATMs. With a debit card, consumers aren’t entitled to as much protection regarding theft, so it’s helpful to use a credit card whenever making purchases at an outdoor payment terminal that’s vulnerable to skimmers. Still, it’s important to know how to spot credit card skimmers so you can hopefully avoid them.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
What does a credit card skimmer do?
Credit card skimmers illegally collect information from credit and debit cards. Skimmers are typically attached to outside payment terminals like ATMs or gas stations.
Are card skimmers illegal?
Yes, credit card skimmers are illegal. This is why credit card issuers are creating new technology like chips to help make purchases more secure.
How common is credit card skimming?
Credit card skimming is all too common. The FBI reports that it costs financial institutions and consumers more than $1 billion per year.
Photo credit: iStock/greyj
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
If you’re wondering whether a bank checks your credit when you open a checking account, the answer is typically no…but there’s more to the story than that one little word.
When it comes to starting a new checking account, banks don’t usually check your three-digit FICO® score — the most common score used by lenders — in order to determine your eligibility to open a checking account. They do, however, often look into your banking history via an agency known as ChexSystems.
Here’s a closer look at credit checks when opening an account and what could prevent you from getting that approval you’re after.
Key Points
• Banks typically do not check your FICO score when you open a checking account.
• Instead, they may review your banking history through ChexSystems, which records banking behaviors like overdrafts.
• A negative ChexSystems report can prevent you from opening a bank account.
• Opening a checking account does not affect your credit score as it does not involve a hard credit inquiry.
• Some banks offer accounts without consulting ChexSystems, allowing more people to open accounts despite past banking issues.
Whether or Not Banks Run Credit Checks for Checking Accounts
First, know that when most entities check your credit, they’re looking at that three-digit FICO score mentioned above — the one that ranges from 300 (poor) to 850 (exceptional). They will likely also receive your entire credit report, which is a detailed document listing all your open accounts, their statuses, and several years of your credit behavior, among other items.
When your credit is checked, it can be either a soft or hard credit inquiry. The former are inquiries that don’t impact your precious credit score. But the latter can wind up lowering your score because these “hard pulls,” as they are sometimes known, can indicate that you are shopping around for more credit, which can make you look like a risky prospect.
But back to our question about whether a bank will initiate a credit check…the answer is: not exactly. They typically use their own kind of financial background check system called ChexSystems. It’s a reporting agency that focuses on consumers’ banking behavior.
💡 Quick Tip: Don’t think too hard about your money. Automate your budgeting, saving, and spending with SoFi’s seamless and secure online banking features.
What Is ChexSystems?
ChexSystems is a reporting agency that focuses on your behavior around banking. Some details to note:
• Your ChexSystems report will include your history of overdrafts, negative balances, and bounced checks, as well as any instances of fraud, security freezes, and other items specifically to do with your banking history. So while it’s not a credit check, per se, it is like a credit check, and your report could lead to your being rejected for a bank account.
• Like any other reporting agency, ChexSystems is required by the Fair Credit Reporting Act (FCRA) to issue consumers a free report once a year, so you can regularly check your history.
• If any of the negative items on your report are fraudulent, you can dispute that information with the agency to get it removed — and if they’re legitimate, you can work toward improving the behavior that caused them. (Most information on your ChexSystems report falls off after five years.)
• There are also deposit accounts that don’t pull ChexSystems reports. So even if you’ve got some negative history, it’s possible to turn over a new leaf and work toward a more positive relationship with banking.
Why Do Banks Run Credit Checks When You Open a Bank Account?
Now that you know how credit checks work, you may wonder, Why do banks run credit checks when you want to open an account? Isn’t that their whole reason for being, to give people checking and savings accounts?
While there’s truth to that, banks do rely on their customers to keep their accounts in good order — and to pay fees, ensure checks don’t bounce, and generally be responsible bankers.
Using ChexSystems gives banks an idea of how you might behave as a banking customer in the future based on your recorded behavior. The intel in ChexSystems can also help a bank disqualify you from obtaining an account if they don’t think you pass muster.
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 4.00% APY on savings balances.
Up to 2-day-early paycheck.
Up to $2M of additional FDIC insurance.
Does It Hurt Your Credit Score When Trying to Open a Bank Account?
One exciting corollary to the fact that banks don’t pull your credit score when opening an account: Opening a bank account won’t hurt your credit score, since there’s no hard credit inquiry involved. That’s comforting news to anyone opening a new bank account. It also means you can even open a few different checking and savings accounts (perhaps you want a regular checking account, plus one for your side hustle income, as well as a savings account for your emergency fund), and you won’t negatively impact your rating.
Stressed about your credit score and not loving where it’s lingering? Building your credit score is definitely an important step toward plenty of financial goals, and the behaviors you cultivate to do so may also improve your ChexSystems report. Moves like lowering the amount of debt you carry, paying bills on time all the time, and not opening too many lines of credit can really pay off.
Reasons Why You Might Be Denied a Checking Account
Unfortunately, every now and then, people do get rejected when they apply for a bank account. For banks that use ChexSystems, these are some of the reasons for a denial.
Unpaid Negative Balance on a Previous Bank Account
As mentioned, banks aren’t officially loaning money to checking account holders — but if you maintain a negative balance on an account and never pay that money back, the financial institution is on the hook for that loss. For this reason, negative balances on existing or previous accounts can spell rejection for a new one.
Abusing Overdraft Privileges
On a similar note, overdrafting again and again hinders a bank’s ability to stay in the black on your account. That goes double if you’ve avoided paying overdraft fees or other charges associated with your behavior.
Fraudulent Activity on Previous Accounts
ChexSystems records suspected fraudulent activity — which, obviously, is not something a bank wants to have to deal with in the future.
Having a Joint Account With Someone Who Has Negative Unpaid Balances on Their Accounts
When you have a joint bank account, your partner’s behaviors can affect your standing as much as your own. So even if it’s not you who’s wreaking havoc on your bank account, the other person’s negative balances, overdraft abuses, and fraudulent activity could negatively impact your ChexSystems report.
The Takeaway
If you’re sweating whether opening a bank account can involve a credit check that deflates your credit score, don’t worry. Most banks don’t pull a hard credit check to qualify you for a checking account. However, they might look into your ChexSystems report, a banking industry way of peering into an applicant’s history. Certain negative items can disqualify you from opening a bank account.
That said, there are banks out there that don’t use ChexSystems to qualify their customers, and SoFi is one of them.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
FAQ
Do banks check your credit score when opening a checking account?
While banks don’t check your FICO score to qualify you for a checking account, they may check your ChexSystems report. This is similar to your credit report but focused specifically on your banking history.
Can you be denied a checking account because of bad credit?
You likely won’t be denied a checking account because of bad credit directly. However, if you have bad credit, you may also have negative items on your ChexSystems report that could disqualify you from some (but not all) bank accounts.
Why would a bank deny a checking account?
A bank might deny your request for an account if you have negative items on your ChexSystems report, such as fraudulent activity, negative balances, or unpaid overdraft charges.
SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
It’s not your imagination: Grocery prices are rising, having gone up 2.2% between February 2023 and 2024, after the sticker shock of an 11% increase between 2021 and 2022.
You may think there’s not much you can do about the high cost of groceries (after all, a person has to eat!), but there are many easy ways to slash your weekly spending on groceries. And, saving at the supermarket doesn’t have to mean skimping on quality, taste, or nutrition.
What follows are 31 simple tricks that can help you shop smarter and spend less whenever you visit the supermarket.
Key Points
• Grocery prices have increased significantly, prompting the need for budget-conscious shopping strategies.
• Planning meals, understanding pricing, and avoiding shopping when hungry are key to saving on groceries.
• Buying in bulk, choosing generic products, and shopping in season can reduce costs.
• Making a shopping list and sticking to it helps avoid impulse purchases and manage spending.
• Utilizing online grocery shopping can prevent off-script purchases and facilitate price comparison.
Key Principles Behind Saving Money on Groceries
Before diving into the ideas for saving money on groceries, consider the big-picture principles at work when it comes to frugal living for food. Consider these concepts:
• Plan your meals
• Understand pricing
• Don’t shop when hungry
• Buy in bulk when possible
• Choose generic products
• Shop in season
• Comparison-shop like a pro; no grabbing the first item you see
• Stick to your list
• Buy local or grow your own food.
💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.
How Much Do Groceries Cost on Average?
The average household spends about $270 a week on groceries; those with kids spend more, or about $331 per week. Using Census Bureau data, the average monthly costs for groceries therefore tops $1,000.
These costs are strictly for groceries. If you eat out or grab takeout (whether a flat white or fancy salad), your total food costs will of course be higher.
How Can I Determine What My Budget Is?
It’s important to set aside an amount of money for food that fits into your overall financial planning. In terms of how to make a budget, you might try the popular 50/30/20 budget rule. With this plan, you take your after-tax income and allocate 50% to needs, such as housing, utilities, health care, minimum debt repayment, basic transportation, and food. Thirty percent is for the “wants” in life, such as travel, dining out, and cute (but not vital) clothes. The last 20% goes to savings and additional debt payment.
If you use this budget or another method, you will want to make sure that your food costs fall in line with the other necessities of life, perhaps trimming from your spending on “wants,” if needed.
Tips for Grocery Shopping on a Budget
Now, dive in and learn how to trim your grocery bill and live on a budget.
1. Make – and Stick to – a List
Impulse buys can quickly bust your budget. So before going to the supermarket it can be wise to plan out your meals and make a detailed list of all the things you will need, including any household supplies.
At the store, you’ll want to be strict about sticking to the list. Yes, those pineapples look great and they’re on sale, but are they on your list? No? Then you should probably keep walking. Otherwise, you may well wind up blowing your budget.
Shopping with a list not only helps save money but can also cut down on food waste — the items that tend to sit idle in the fridge or on the countertop are often the ones that never had an assigned meal to begin with.
2. Eat Before You Shop
If you enter a supermarket hungry, there’s no telling what you’ll end up putting into your cart because, since just about everything is going to look good. Some popcorn? Why not? Pomegranate juice? It’s healthy, so into the cart it goes. And maybe some cookies as a little treat.
Walk into the grocery store with a full stomach, on the other hand, and you might be shocked by how much lower your grocery bill is.
3. Plan for Leftovers
In America, 80 million tons of food go to waste every year. One reason that food goes to waste is that it can be difficult to buy the exact amount of food you need to make the meals we’ve planned. This can result in leftover ingredients languishing in the fridge or pantry, and then landing in the trash can.
You can help reduce wasted food (and money) by doubling your recipe and then having leftovers for lunch and/or putting some in the freezer so you’ll have a meal at the ready when you need it.
Think you’ll be tempted to go off-script if you enter a grocery store? You might want to try online grocery shopping instead. Many local supermarkets offer online ordering, and allow you to choose either curbside pick-up or delivery.
Or, you may want to try one of the many online grocery services, such as Instacart or Amazon Fresh. You can often choose one-off delivery, as well as recurring delivery of staples (like toilet paper) so you never run out.
It can be easier to avoid the temptations when you can type everything you need into a search bar. Plus, shopping online makes it easy to compare brand prices, see what’s on sale, and watch the total tally up in real time.
5. Develop a Green Thumb
Even if you’re not much of a gardener, you might want to try growing one or two of your favorite vegetables in a container or a small garden area outdoors. You can then step outside and pick your tomato or bell pepper rather than buying them at the store.
If you don’t have any outdoor space, you might consider starting an indoor herb garden. If you have parsley, basil, or dill right on your windowsill, you can just pick what you need rather than buy a whole bunch at the market. It’s a fun and tasty way to stick to your budget.
6. Shop at Stores You Know
Having a tried-and-true grocery store may be good for your wallet. Walking into a store you’re familiar with means you already know where to get the items on your list.
Head into an unfamiliar store and you may be left wandering the aisles for what seems like an eternity trying to find your goods. That’s because grocery stores are set up to be a little confusing and to drive consumers to have to do a bit of strolling, as that’s when you’re more likely to make random purchases.
7. Bring Your Own Bags
One quick way to potentially drive down the cost of your grocery store run is to BYOB — bring your own bags. Many cities and states have imposed plastic bag bans. If you show up empty-handed, you’ll be stuck purchasing reusable bags at the checkout.
In areas where plastic bags are allowed, many stores will reward customers who bring reusable bags by reimbursing them about 5 to 10 cents a bag at checkout. BYOBing is also kinder to the environment.
Keeping some reusable bags in your car is a good way to avoid forgetting them at home.
8. Join Loyalty Programs
Many stores now offer discounts for regular shoppers and even secret sale items only for those who’ve signed up.
It’s typically quick, easy, and free to join, though some stores like Whole Foods require customers to be part of its Amazon Prime membership service (which comes with a yearly fee). Still, it may be worth it as discounts at the register can add up to real savings.
9. Embrace Meatless Mondays
Here’s another way to buy groceries on a budget: Buy and eat less meat. Reducing meat consumption and eating more plant-based meals has benefits for the environment, your waistline, and your wallet.
Chickpeas, pinto beans, peas, Brussels sprouts, quinoa, tofu, along with many other beans, whole grains, and vegetables are all excellent (and inexpensive) sources of protein without the added saturated fat that comes with animal products.
You may want to consider going meatless at least one day a week, and then building up to a few meat-free meals per week.
10. Buy Larger Containers
Buying the largest size of packaged, canned, and frozen foods can sometimes help you save money on food. That’s because some of the cost of every grocery item is in the packaging.
If your grocery store has a “bulk foods” section you might save even more by buying the amount of food you need in plastic bags.
11. Think Beyond Fresh Produce
Another way to save money at the grocery store is to buy fruits and vegetables in the frozen or canned foods aisle. The savings can add up, especially when the food is out of season.
If you’re looking to add pineapple to a recipe in the winter, for example, you can save money by opting for canned pineapple over a fresh one that’s not in season. Canned and frozen fruits and vegetables also don’t go bad as quickly as fresh, so they may be less likely to get wasted.
12. Try a CSA
A Community-Supported Agriculture (CSA) program can help you save money on fresh produce, eggs, and herbs. You can look for one using the USDA’s CSA directory and see if they’ll deliver to your front door.
Not only will you be saving money but you’ll be supporting local farmers and eating food that’s close by helps ensure it’s fresher.
13. Clip Coupons
While it’s not rocket science, this tried-and-true technique is still one of the best ways to cut your grocery bill. You may want to consider scanning the local circulars that come in the mail to see which stores are having deals on the food items you need that week. You can also look for manufacturers’ coupons (online and in circulars inserted into Sunday newspapers).
When it comes to how to coupon successfully, however, it’s wise to make sure that you’re only buying items you need and usually buy — otherwise you could end up adding to, not shrinking, your grocery bill.
💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your online savings account.
14. Shop in Season
Another way to spend wisely is to cook and shop seasonally. It’s typically cheaper to buy fruits and vegetables that are in season than ones that have been shipped to the store from a far-away place where it can be grown year-round.
Also, since in-season produce is in large supply, it tends to be sold at affordable prices to maintain demand. In-season produce also tends to be tastier.
15. Use Apps
There are a number of rebate apps you can download onto your phone for free that allow you to get cashback on items you purchased. Options include Ibotta, Checkout 51, and Fetch.
While rebates don’t give you a discount upfront (like a traditional coupon), you should see savings in the long run.
If you frequently shop at large chains like Walmart or Target for groceries, getting their apps may help you earn rewards and get discounts for being a loyal shopper. You just need to scan your mobile app when you check out.
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 4.00% APY on savings balances.
Up to 2-day-early paycheck.
Up to $2M of additional FDIC insurance.
16. Stock up on Shelf-Stable Items
When your grocery store is having a sale on canned goods, dried goods, or other pantry items, you may want to consider buying multiples. Items like beans, sauces, soups, nuts, peanut butter, pretzels, shelf-stable snacks like unpopped popcorn won’t expire for a long time.
You’ll be able to enjoy the cost savings and will likely appreciate having them on hand when preparing meals.
17. Buy Store-Brand or Generic
You don’t have to sacrifice flavor and taste in order to save money while grocery shopping. While It’s easy to overlook no-name or store brands, in many cases these items are actually made by the brand name companies, just with a different label.
And the savings can be real. Using generic (rather than brand name) products can save as much as 40% off your grocery bill. You can put that extra cash right into your bank account.
18. Shop the Outside Aisles
The inside aisles of the grocery store are where pricier processed foods are typically stocked, The outer edges, on the other hand, is where you tend to find fresh fruits and vegetables, grains and beans.
Shopping on the edge — and filling your cart with nutrient-dense items and fresh, seasonal food — can help your wallet, as well as your waistline.
It can be tempting to buy convenience items where food is pre-portioned into single servings so you can just grab-and-go. Smaller items can also help you keep from overeating. But all of that packaging tends to increase the cost of the item.
If your kids love crackers, you may want to buy a full-size box and portion them out in zip-top bags or reusable containers. You can do the same with other favorite snacks so you won’t be tempted to eat the whole bag in one sitting. You can also spoon yogurt into small containers for school lunches and cut cheese into slices from a block for easy snacks.
20. Drink Tap Water
To avoid spending money on bottled water, you may want to get a filtered pitcher and switch to drinking tap water. Depending on how much you typically sip, you can save a bundle. By drinking from a reusable water bottle or a glass throughout the day, you’ll also reduce the amount of plastic waste you’re putting into the environment.
Getting your kids used to drinking water instead of juice or soda can also reduce your supermarket bills.
21. Use a Smaller Cart
Here’s a little swap that can help you save: If you’re not shopping for a full week’s worth of groceries, consider grabbing a small cart or, even better, a hand-held basket. This will automatically limit how much you can buy because only so much will fit.
When you have a smaller cart — or a basket that will get heavy quickly — you’re forcing yourself to ask, “Do I really need this?” every time you pick up something to buy in the store.
22. Minimize Trips to the Store
One way you can save money on your grocery bill is to only shop when you need to and to minimize the frequency that you set foot in the supermarket door.
The reason is that the less often you’re physically in the store, the less likely you’ll be tempted to buy something you don’t absolutely need. It can be all too common to go to the grocery store for “one thing” and come out with a few items.
23. Shop Off-Peak
Most of us don’t want to spend our weekends grocery shopping, right? Unfortunately, Saturdays and Sundays are the days when many of us have the time to go to the supermarket — along with everyone else in our town.
Shopping during peak times can hurt your budget in a few ways. You might try to speed through the supermarket crush and be more likely to buy an item at the end of the aisle because it’s convenient, rather than grab a similar product on the shelf a few feet away. This could mean they are buying a more expensive version of what they need.
You might also run into trouble shopping during peak times because you’re more likely to get stuck in a long line — and become tempted by miscellaneous items stocked near and along the checkout line.
24. Calculate the Bill While You Shop
Shopping with a calculator or getting out your phone and adding things up as you put them in your cart can help you stick to your spending plan<. (If you’re shopping with kids, you can give them the job to tally what’s in the cart.)
By keeping a running tally of how much money is in your cart, you can save yourself from any unpleasant surprises during check-out. Plus, it can make you think twice before putting any extras in your cart.
25. Shop Your Pantry First
It’s easy to accidentally buy an extra item at the supermarket that you didn’t realize you already had stored at home. That’s why after you write your grocery list, it can be a good idea to double-check pantry shelves, spice racks, the fridge, and the freezer to make sure you truly need what’s on your list.
You may even want to shop your pantry and fridge before making your meal plan and shopping list to see if you can think of meals that incorporate foods you already have on hand.
26. Pay with Cash
Another idea for grocery shopping on a budget: A simple trick for lowering your grocery bill is to set your budget and then only bring that much money in cash, leaving the plastic at home.
This will help ensure that you stick to your list and avoid grabbing any tempting extras. You can only spend what you have in your wallet. Full stop. (A variation on the theme: Use your debit card, not your credit card, to keep your spending in line.)
Eggs are one of the most affordable protein sources out there. By making simple breakfast-style food for dinner, you’re offering your family a fun meal and using up some of your (affordable) breakfast foods.
You might consider making an omelet or frittata with eggs, cheese, and leftover vegetables or creating a bacon, egg, and cheese burrito. Not only are many breakfast recipes a delicious dinner option, but they’re affordable and often quick to prepare.
28. Avoid Eye-Level Items
Grocery stores are designed to get you to spend more money, which is why the most expensive products tend to be stocked at eye level. Brands often pay more money for their products to be displayed prominently so you’re more likely to buy them.
Searching high and low when you’re shopping may help you stop spending money (or at least more than you budgeted for). Once you start looking, you may even notice a price differential between the eye-level item cost and the one at your feet.
29. Bake Your Own Treats
Many impulse buys happen in the bakery and snack sections of the supermarket. Before you succumb, you may want to ask yourself if you could bake it at home. You may already have the baking basics on your pantry shelves and could whip up some muffin or cookies fairly quickly. Or, you might want to buy a mix to save time (you’ll still save money).
Before buying chips and snacks, you may also want to consider if there is a more affordable DIY option, like buying popcorn kernels to cook on the stove.
When it comes to snagging good deals, shopping on a Wednesday may be beneficial. That’s because grocery stores tend to restock their shelves and make new markdowns in the middle of the week. Since they’re in the process of changing the discounts, they may still honor the price cuts from last week’s sale as well as the new ones, which could help boost your savings.
31. Do the Prep Work Yourself
Those packaged baby carrots and bagged pre-washed salads make it easier to eat healthier, but if you’re willing to do the cleaning, prepping, and chopping of fresh produce, and even meats and poultry, you can save money.
A boneless, skinless chicken breast package will cost more than buying a whole chicken. You’re paying for the convenience. By setting aside time to prep and chop your foods after you get home from grocery shopping, you’ll likely reap savings.
The Takeaway
A little planning and knowing some money-saving tricks can help you lower your monthly grocery bill and stick to your budget.
By following these budget shopping tips, you may find that you have more money left over each month to pay down debt, invest for the future, or save for something fun. And those funds can grow if you put them in an interest-bearing bank account.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
FAQ
What is a realistic budget for groceries?
The average household spends $270 a week on groceries, but how much you need to spend will vary on family size, location, and other considerations.
Which store is cheapest to buy groceries?
Which grocery store is cheapest will vary from location to location, but among the most affordable are Aldi, Lidl, Market Basket, WinCo, and Trader Joe’s.
How can I make my grocery bill cheaper?
Some ways to go grocery shopping on a budget include buying in bulk, buying generic products, planning your meals in advance, and using coupons, apps, and loyalty clubs.
SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
If you’re like most Americans, your paycheck turns up in your bank account automatically, without any check to sign or wad of cash to pocket and then get to the bank.
With direct deposit, funds are electronically transferred out of one bank account and (ka-ching!) deposited into another. It’s a convenient way to automate one’s finances, and it’s not limited to paychecks. It can streamline other financial transactions as well.
Here, you’ll learn more about this process, the pros and cons of direct deposit, and ways you might want to put it to work for you.
Key Points
• Direct deposit is an electronic transfer of funds from one bank account to another, commonly used for payroll.
• It was introduced in 1972 with the formation of the first Automated Clearing House (ACH) network.
• Nearly 93% of employed Americans receive their salaries via direct deposit.
• The process involves employers sending an electronic file to the bank, which then distributes funds to employees’ accounts.
• Direct deposit is also utilized for government benefits, tax refunds, and other payments.
What Is Direct Deposit?
As mentioned above, direct deposit is a way of electronically transferring funds between bank accounts.
It was pioneered more than 50 years ago. In 1972, the first automated clearing house (ACH) network formed to manage electronic payments, with other networks quickly following. In 1975, the Social Security Administration (SSA) decided to test the system of direct deposit for payments they issued. Today, 99% of SSA’s payments are directly deposited.
Today, nearly 93% of employed people in the United States receive their salaries or wages this way.
What’s more, these automatic bank transfers are used today in ways beyond having paychecks directly deposited, including bill pay, retirement account contributions, and more.
💡 Quick Tip: Did you know online banking can help you get paid sooner? Feel the magic of payday up to two days earlier when you set up direct deposit with SoFi.
How Does Direct Deposit Work?
You’ve now learned a bit about what direct deposit is and how the ACH system facilitates direct deposit, allowing funds to flow seamlessly and quickly from one account to another.
Here, a bit more intel on how this process can be put to work for you and how to set up direct deposit.
Direct Deposit for Payroll
Let’s say that someone is ready to start a new job. The human resources department explains how the company either requires direct deposit or offers the option.
• If that employee wants to set up direct deposit, they would need to share bank information with their new employer, including the bank’s name, the routing number that identifies the financial institution, and the employee’s bank account number. Sometimes, a voided check is requested.
• This information would then be entered into the company’s payroll system and, whenever payroll rolls around, the company would send an electronic file to this employee’s financial institute. This file would share how much money should be transferred from the company’s (the “originator’s”) bank account to accounts for each of the employees whose direct deposit accounts are located at that particular financial institution.
• If, for example, three employees of a company all share Bank A, then let’s say this bank receives an electronic transfer of $4,345. Bank A would then distribute the money appropriately into the proper bank accounts, perhaps:
◦ $2,000 in Person A’s checking account and $500 into their savings account
◦ $1,350 in Person B’s account
◦ $445 in Person C’s checking account and $50 into their savings account.
• Then, if the employees (known as “receivers”) check their bank balances, they’ll see the deposits made through this direct deposit process. As noted in this example, money may be directly deposited to a checking account or into a savings account. Or some money can be put into a savings account with the rest in a checking account.
• How long does direct deposit take? Typically, the funds go through like clockwork and are there waiting on payday. Some banks may offer the ability to access your direct deposit up to two days sooner.
What Are the Uses of Direct Deposit?
There are several uses for direct deposit:
• Payroll. As noted, the vast majority of Americans get paid this way.
• Tax refund. This can be among the quickest ways to get your tax refund. The IRS can process a direct deposit refund for an electronically filed return in as little as seven to 10 days of receipt.
• Government benefits. Social Security and Supplemental Security Income benefits, VA, unemployment, and other benefits can be paid via direct deposit.
• Commissions, rental income, vendor payments and other earnings can be automated with direct deposit.
• Dividends. Shareholders may receive dividends by direct deposit.
• Child support. This may also be automated.
Benefits of Payroll Direct Deposits
Direct deposit has many benefits. Here’s a closer look:
• Convenience: With a direct deposit of their paycheck, employees can skip the step of physically depositing a paycheck into their accounts, which can be a timesaver.
This can be especially true if the employee telecommutes from home, is on vacation, or is otherwise out of the office when payday comes, because that employee doesn’t have to go into the office to retrieve the paper check.
• Speed: With direct deposit, the money is typically in an employee’s bank account at the start of the designated payment date, which gives them access to the funds that day. No waiting for checks to clear.
• Security: With paper checks, there’s always the possibility that they will get lost or stolen. So, payroll direct deposit can add a layer of security to the process.
Many times banks will waive fees for customers who have direct deposits set up.
• Savings: Many times banks will waive fees for customers who have direct deposits set up, although there may be a minimum deposit amount required for this to happen.
• Better money management: If an employee puts a percentage of each paycheck automatically into a savings account, this can get them into a regular savings habit.
Downsides of Payroll Direct Deposit
Now, for the other side of the coin, the cons of direct deposit:
• Inconvenience: When people receiving direct deposits decide to change banks, it may be a hassle. It may take workplaces a period of time to change where paychecks are sent, which means that the old account might need to be kept open longer to make sure all paychecks are received.
How long that period of time may be can vary. But, before you close your old account, ensure that all direct deposits are being put into the new account. Also make sure that all withdrawals and checks have cleared at your old bank and that any automated payments are coming out of the new bank.
• Scheduling: With direct deposit, it’s important to make sure the correct deposit dates and amounts are recorded. Otherwise, account holders could write checks beyond what’s available, which could trigger overdraft or non-sufficient fund (NSF) fees — which can be costly, especially when they add up.
• Lack of access: Not everybody in the United States has a bank account. If someone doesn’t but their employer requires direct deposit (more about that next), then employees without a bank account would likely receive their paychecks through a prepaid debit card. These can come with fees and, like paper checks, can be lost or stolen.
Here are the pros and cons in chart form:
Pros of Direct Deposit
Cons of Direct Deposit
Convenience receiving funds
Inconvenience if you change banks
Speed (no waiting for checks to clear)
Scheduling; must be sure funds arrive
Security (no carrying around cash or checks getting lost in the mail)
Lack of access for those who are unbanked
Savings; banks may offer discounts or bonuses if you receive qualifying direct deposits
Better money management
Employers Requiring Direct Deposit
Just as there are benefits to payroll direct deposit for employees, there are also benefits for employers. For instance, it’s cheaper to manage payroll payments this way, versus physical checks.
Plus, they have a record of accounts, which makes it easier for companies when they’re reviewing expenses — and they don’t have to reissue a check if an employee loses one.
And, after a person’s payroll information has been entered into the system, paying employees can be faster and easier with direct deposit.
Laws governing payroll direct deposit vary by state and, if a state has no specific laws on this subject, it defaults to federal regulations. Federal law states that employers must give each employee using direct deposit a summary of rights and liabilities and must get their signature on an authorization form along with relevant banking information.
Some states allow employers to actually require direct deposit for payroll, as long as the program is administered in a way that’s consistent with federal regulations. (In some cases, the rule only applies to public sector workers.) Most states, however, still give employees the choice between direct deposit and receiving a physical check.
A handful of states have laws that are unique to them, ones that don’t fit into any of the broad categories already described.
Automating Your Finances
The concept of electronic funds transfers is at the heart of payroll direct deposits, but goes beyond that. Here are additional ways to benefit from automating your finances.
• Automation is a tool that can also help people to build an emergency savings account. In general, traditional wisdom says this account should contain three to six months’ worth of living expenses.
That way, if an emergency arises (whether that’s a job loss, an unanticipated repair, or unexpected medical expenses), a financial cushion exists. By setting up a regular funds transfer to a savings account, this can make it easier to build up that emergency fund.
• Another way to streamline your financial life: paying bills through autopay. In some instances, lenders may offer a discounted interest rate for borrowers who use automated payments to pay their bills. Autopay can help borrowers make their payments on time, rather than forgetting them when life gets hectic. This can mean fewer or no late fees.
Autopay can help borrowers to make their payments on time, rather than forgetting them when life gets hectic.
• Because payment history plays a key role (35%) in a person’s FICO® Score, autopay can help you establish and maintain your credit score. By automating payments (as long as enough money is in their checking or savings account when the payment is due) you can optimize this aspect of your cash management.
• Autopay helps to reduce the number of paper bills that need to be sent out and the number of paper checks that may be written to pay those bills. This means that automated funds transfers can therefore be an eco-friendly choice to make.
• Whenever funds are electronically transferred, either in or out of a bank account, a digital record is automatically created. This can be helpful when balancing accounts, creating a budget, looking for tax deductible items, searching for ways to trim discretionary spending, and more.
• Autopay might also be a good strategy to use to contribute to a retirement account. Employers may automatically deduct an amount from employee paychecks to transfer it into a retirement account that’s set up by the company. That can make saving super easy.
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 4.00% APY on savings balances.
Up to 2-day-early paycheck.
Up to $2M of additional FDIC insurance.
Types of Accounts for Direct Deposits
For people who decide to use forms of automated funds transfers, here are some options to consider for receiving direct deposit:
If you’re interested in opening a bank account to receive direct deposits, take a look at what SoFI offers and see if SoFi direct deposit is a good fit for you.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
FAQ
What is the meaning of direct deposit?
Direct deposit refers to the automated transfer of funds from one bank account to another. This means cash doesn’t need to change hands, nor does a check need to be written and then deposited.
How do you get direct deposit?
Typically, signing up for direct deposit involves sharing your bank account and routing number with, say, your employer or the government so they can direct deposit funds in your account. In some cases, you may be asked to share a voided check.
Is direct deposit only for paychecks?
Direct deposit is not only for paychecks. It can also be used for government benefits (such as Social Security), commissions, tax refunds, investment dividends, and other forms of payment.
SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Getting a credit card with no deposit can be easy if you have an established credit history with a good or excellent credit score. But if you’re just establishing your credit history or are trying to build your credit score, it can be much more challenging to apply for a credit card with no deposit.
For some, a secured credit card (one requiring a security deposit) might seem like the only option, but there are other paths to building your credit history. In this guide, we’ll cover how to find and apply for credit cards with no deposit — and what steps you can take to get closer to approval if you’re getting denied.
What Is a Credit Card Security Deposit?
Because of their established credit history and decent credit scores, many borrowers can open credit cards with no money down (or any other kind of collateral). This is called an unsecured credit card. However, if you don’t have any credit history or have a low credit score, you might find that credit card issuers will only offer you a secured credit card — meaning it requires a security deposit.
A credit card security deposit is refundable and often equal to the value of the credit limit on the card. Typically, the deposit amount ranges from $50 to $300.
While going this route can’t help you with unexpected expenses (as with a debit card, you are technically only able to spend money you already have), it can be a good way to build credit. However, you’ll want to ask the card issuer if they report to the credit bureaus, just to ensure they do.
Eventually, you may be able to graduate to an unsecured card if you consistently make on-time payments — one of the cardinal credit card rules.
Applying for a Credit Card With No Security Deposit
Applying for a secured credit card requiring a deposit might not be appealing to every potential borrower, especially because you need the money for the deposit upfront. These cards also typically have higher interest rates and fees. Fortunately, you have other options when shopping for a credit card.
Checking Your Approval for a Card
There’s no such thing as guaranteed credit card approval with no deposit. However, if you’re receiving emails or snail mail with credit card offers saying you’re preapproved, you might find success when you apply. You’ll still have to go through the formal application process and could ultimately get rejected, but getting a preapproved offer is a good start towards getting a credit card.
You can also proactively check your approval for a credit card online. Take a look at your credit score and then search online for offers for credit cards with no deposit that include your credit score in their target range.
Becoming an Authorized User
If you aren’t having success getting approved for a credit card on your own, ask a parent, family member, or trusted friend about being an authorized user on their credit card. As an authorized user, you’ll receive a credit card with your name on it and can use it like a traditional credit card, but you will not be the primary account holder.
The primary account holder is the one responsible for making on-time payments and monitoring credit usage. As an authorized user, you won’t have control over things like credit limit, and the primary cardholder can even set spending limits on your card.
However, if the primary cardholder uses the credit card responsibly — making regular, on-time payments and keeping credit utilization low — you will likely see a positive impact on your own credit score. Eventually, your score might improve enough for you to try applying for your own card again.
If someone makes you an authorized user on their card, however, it’s important to pay them what you owe each month. Never rack up credit card charges beyond what you’ve discussed with the cardholder. If you abuse your card privileges, it will affect your credit score and the score of the account holder — and the friend or family member will be solely liable for paying off your debts.
Getting a Student Credit Card or a Subprime Card
If the thought of affecting someone else’s credit score as an authorized user makes you uncomfortable, you aren’t out of options. You might be eligible to apply for a student card or a subprime card.
• Student credit card: Most student cards do not require a security deposit and are designed for students who have no credit history. Some cards might even offer cash back rewards and no annual fees. However, as the name implies, you must be able to prove you are a student as part of the application process.
• Subprime credit card: A subprime card is an unsecured card (i.e., no-deposit card) designed for borrowers with bad credit (generally a score below 580 in the FICO® score model). While subprime credit cards provide a way for bad-credit borrowers to get a credit card with no deposit, they often come with their own drawbacks. Typically, subprime cards charge an application fee; some might have annual or even monthly fees. Credit limits tend to be low.
Transitioning to an Unsecured Card
If you have no luck with a student or subprime card and can’t become an authorized user, you may need to consider applying for a secured credit with a deposit after all. Although it might not be ideal, it can be a good first step toward building your credit history.
If you make regular on-time payments, the credit card issuer might eventually transition you to an unsecured card. Alternatively, you can be proactive: After building your credit history and score over several months with a secured credit card, you can apply for a credit card with no deposit through another issuer. You might find that you’re more successful this time around.
What to Know About the Effects of Your Credit Score
An unsecured credit card can potentially affect your credit score if the credit card issuer reports to the credit bureaus. Before opening a credit card with a security deposit, ask the issuer if they report to the bureaus.
If they do, regular on-time payment could build your score over time. On the flipside, late or missed payments could adversely affect your score.
Getting a No-Deposit Credit Card: What You Should Know
So, should you get a no-deposit credit card? In general, these unsecured cards offer greater flexibility at the start because you aren’t required to pay a security deposit.
However, opening a credit card of any type is a big decision — and not one to be taken lightly. It’s important to consider the potential effects of opening a credit card and to be aware of how much a credit card costs. For example, if you max out a credit card with a high interest rate, you might find yourself drowning in the fast-growing debt it creates.
Before opening a no-deposit credit card (or any credit card), think about the implications it can have on your finances. You might consider alternate ways of establishing credit, like credit-builder loans or even small personal loans.
However, these options don’t offer some of the same perks and protections that a credit card does, such as credit card chargebacks. If a credit card feels like the right step for you, begin your research process online.
Credit cards without a security deposit, called unsecured credit cards, can be appealing because there is no money down at the start of the loan. However, borrowers without a credit history or who are struggling with bad credit may find it challenging to get approved for a no-deposit credit card. If applying for a secured credit card (i.e., one with a security deposit) is not ideal for your financial situation, you can ask to become an authorized user on someone else’s card or apply for a student or subprime credit card.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
Do all credit cards require a deposit?
Only secured credit cards require a security deposit. Those with no credit history or bad credit scores might only be eligible for secured credit cards. If you have a good credit score, you can apply for a credit card without a deposit.
Can I get a credit card if I have no credit history?
It is possible to get a credit card with no credit history. A secured credit card requires a security deposit but makes it easier for borrowers with no credit history to get approved. Students can also consider student credit cards, which are often issued to student borrowers without any credit history.
What credit score is required for approval?
While having a good to excellent credit score (typically 670+) is ideal for getting the best credit cards with the lowest rates, some credit card issuers do offer cards for borrowers with fair or even poor credit (meaning scores between 580 and 669). These cards might have higher fees and fewer perks and may require a security deposit.
Photo credit: iStock/Prostock-Studio
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
